Toronto should make the traditional taxi system look more like the ridesharing model, rather than the other way around.
Toronto’s taxi wars are in full effect.
Drivers operating under the city’s strict regulatory system for taxi cabs have in recent weeks protested in front of city hall in an effort to get elected officials to crack down on new ridesharing services such as Uber. They argue that the current rules create a two-tiered system, allowing rideshare services to circumvent stringent rules and regulations that currently apply to standard taxi operators.
They want the city to ensure these rules – and the costs they incur both on operators and customers – are applied to new entrants.
But officials should do the opposite and make the traditional taxi system look more like the ridesharing model, rather than the other way around. Less regulation – consisting of scrapping government quotas and eliminating price controls – would benefit consumers and drivers alike. Many cities and countries around the world have already deregulated their taxi systems to great benefit.
In Indianapolis, officials eliminated regulations for price controls and entry restrictions for the city’s cab industry – much to the delight of its residents. After deregulation, fares fell, new taxi companies entered the market and service quality improved. Some of the new companies were minority- and women-owned, offering them the opportunity to break into a market that was previously off limits due to high entry costs. One local paper concluded that the deregulation experiment was a “remarkable success.”
In Ireland, deregulation caused a surge in the number of cabs available to customers, a sharp drop in waiting times and significant savings. Two years after deregulation, the number of cabs in the country’s largest city, Dublin, increased from 2,700 to 8,400 – with similar trends repeated around the country. The number of customers waiting less than ten minutes for a ride increased to 86 percent – a sharp increase from 58 percent prior to opening up the market.
Overall, deregulation in Ireland saved customers as much as €780 million ($1.1 billion in current CAD).
Deregulation in Ireland has also allowed many part-time drivers to enter the market. These drivers often work during peak periods – on the weekend – and offer a valuable contribution to handling peak travel times.
In New Zealand, deregulation saw the number of cabs in the country’s largest cities increase by 200%. Fares, meanwhile, fell by 15-25% in those cities. Innovation among the taxis also took hold, with many companies introducing taxi vans as well as both high-end and budget options.
In Sweden, deregulation produced shorter wait times for customers, more options and increased specialization, as companies focused their efforts on different segments of the market – such as business clients or general fares. Some companies began introducing smaller cars as a way to keep costs low.
Taxi upstarts that have already launched in cities with regulated markets have been a hit with customers by offering cheaper fares and more innovation. Uber – the most prominent of the companies breaking into the taxi industry – has been slashing prices for its customers. Recently, it cut prices for customers in 48 cities across the United States. And unlike traditional taxi companies, the price of Uber fluctuates with demand – meaning that during peak periods like New Year’s Eve, the price of using Uber can increase dramatically and entice more drivers out to work and ensure everyone has a ride home. More cabs on the road will also bring prices back down.
Customers are flocking to the upstarts. Uber says it has served 17 million customers over the past five years, with half of those coming in just the past year. It now operates in 58 countries and 311 cities – and is still growing.
Elected officials want to bring Uber and other competitors under the same regulatory umbrella, but it will be customers who will be left standing in the rain.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236